The Governance Role of Multiple Large Shareholders: Evidence from the Valuation of Cash Holdings
Journal of Management & Governance, Vol. 17, 2013
43 Pages Posted: 11 Nov 2013
Date Written: November 10, 2013
This paper investigates the governance role of multiple large shareholders (MLS, henceforth), as evidenced by their impact on the valuation of cash holdings. For a sample of 2,723 firms from 22 countries, we find that the presence of MLS enhances the valuation of firms’ cash holdings. In particular, we show that the valuation of cash is positively associated with an even distribution of blockholders’ voting rights and with higher contestability of the largest shareholder’s control. We also show that the impact of MLS on the valuation of cash holdings is more pronounced for family-controlled firms, consistent with investors perceiving family owners as associated with greater expropriation risk. Overall, our results contribute to the literature on corporate governance by showing that MLS improve internal monitoring and moderate the agency costs of firms’ cash holdings.
Keywords: corporate governance, multiple large shareholders, cash holdings, firm performance
Suggested Citation: Suggested Citation